Northrop Grumman and EADS ditch US tanker deal

9 March 2010

9 March 2010 | Jake Kanter

US defence supplier Northrop Grumman and its European partner EADS have pulled out of a $35 billion (£23 billion) US air tanker contract.

In a statement late yesterday, the companies said that the US Department of Defense deal for 179 refuelling planes “clearly favours” a rival bid from Boeing.

“The Northrop Grumman and EADS team is very disappointed that the revised source selection methodology now dramatically favours Boeing's smaller refuelling tanker,” said Northrop’s chief executive Wes Bush.

But he said the firms would not contest the deal, despite claiming “substantial grounds” to overturn the procurement process. Further delays, Bush said, were not in the interests of the US Air Force, which urgently needs the tankers.

It is the second time the deal has been thrown into disarray after it was first awarded to Northrop Grumman and EADS in February 2008, sparking an official complaint from Boeing. US politicians were also up in arms because a win for Boeing would have created domestic jobs.

An investigation by the US Government Accountability Office upheld Boeing's complaint on the grounds that the procurement process contained "significant errors".

Northrop and EADS’s decision to pull out now clears the way for Boeing to clinch the latest contract.

Bob Riley, governor of Alabama where Northrop would have fitted out the EADS aircraft, said the deal had become a “charade”.

He added: “The Pentagon and White House have made it impossible for any other plane to be competitive. It’s disgraceful. If this was not a political decision, then why would the Pentagon intentionally rewrite the specifications from what they originally wanted a year ago?”

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